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China suspends bank tech restrictions

Tue, Mar 31, 2015 - 6:44 AM

[BEIJING] China has agreed to delay implementing new bank technology restrictions that Washington has complained represent unfair regulatory pressure on foreign firms, a senior US Treasury official said in Beijing on Monday.

China said this month work was ongoing on a draft anti-terrorism law that would require foreign companies to hand over encryption keys and otherwise facilitate Beijing's ability to bypass security measures, triggering US protests. It followed an earlier set of draft financial sector regulations that pushes China's state-owned banks to buy technology from domestic vendors.

Beijing was now "suspending" the regulations that applied to the banks, according to the official, speaking after meetings between US Treasury Secretary Jack Lew and senior Chinese officials, including Premier Li Keqiang.

There was no immediate comment from China, but US industry groups, which have been lobbying hard on the issue, cautiously welcomed the move. "We are encouraged that there seems to be a delay; what we now need is a transparent, open consultation process with stakeholders and we're hopeful that will be part of the next steps," said US Chamber of Commerce executive director for China Jeremie Waterman.

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The Software Alliance, whose members include Adobe Systems, Apple Inc, IBM, Microsoft Corp and Oracle Corp, and the Software and Information Industry Association(SIIA), which represents financial institutions and tech companies including Google Inc and Thomson Reuters, also found the news encouraging.

SIIA senior director for international public policy Carl Schonander said the delay was a positive development, noting the industry asked for the rules to be suspended. "We have to see what this means in practice," he said. "We definitely would like to see the draft bank regulations published and we'd like to have the opportunity to provide input to this." Mr Lew earlier said the issue needed to be resolved because even having the rules pending created a difficult environment for US firms in China. "We made clear that suspending them is the right approach,"Mr Lew told reporters.

While the policy applied to both domestic and foreign firms, it is seen largely benefiting domestic players.

Another regulation from China restricts the kinds of computers purchased by the Chinese banking industry to ensure that they meet "security and controllability" requirements, seen as a way to make Chinese banks buy "indigenous" software applications. "We have already made clear our concerns regarding forced technology transfer and other attempts to bar technological competition, most recently in the banking sector, and I look forward to further discussion today," Mr Lew said, in remarks made during a meeting with Vice Premier Wang Yang in Beijing.

The US government has complained of industrial espionage by Chinese firms against its companies, saying it is often backed by government agencies including the Chinese military. Beijing denies the allegations.